Discussion
At the start of 08 I supplied a large order to UK client who has not paid us for the goods, ( very long story ) We are now at the stage where goods are coming back to us and a full credit note will be issused to the client.
I have of course paid the VAT on the sale and have got nothing back, can that VAT be claimed back as basically its no longer a sale on my books due to teh credit raised and goods will be shown back into our stock
I have of course paid the VAT on the sale and have got nothing back, can that VAT be claimed back as basically its no longer a sale on my books due to teh credit raised and goods will be shown back into our stock
Absolutely.
No sale happened, therefore the Output VAT declared on that sale - and paid by you to HMRC - was never actually received by you from your customer.
As the customer is returning the stock and you are issuing a sales credit note, then the dale and the related Output VAT will be reversed in your book-keping records and will automatically be deducted from the total sales and Output VAT when the next VAT return is being prepared..
I note that you are not handling this as a Bad Debt situation as it looks like the goods are being returned - which is correct. You can reclaim Output VAT when a customer fails to pay as well.
I am assuming, of course, that you do not operate the VAT Cash Accounting scheme or the VAT Flat Rate Scheme.
I have to ask though - did you not ask your accountant about this?
No sale happened, therefore the Output VAT declared on that sale - and paid by you to HMRC - was never actually received by you from your customer.
As the customer is returning the stock and you are issuing a sales credit note, then the dale and the related Output VAT will be reversed in your book-keping records and will automatically be deducted from the total sales and Output VAT when the next VAT return is being prepared..
I note that you are not handling this as a Bad Debt situation as it looks like the goods are being returned - which is correct. You can reclaim Output VAT when a customer fails to pay as well.
I am assuming, of course, that you do not operate the VAT Cash Accounting scheme or the VAT Flat Rate Scheme.
I have to ask though - did you not ask your accountant about this?
Edited by Eric Mc on Thursday 15th January 11:53
Many thanks, Not asked them yet, I think like many on here we tend to go to the accountant telling them what we maybe should be doing, without doubt the wrong way to do things but PH is such a wealth of knowledge and quick replies 
I think we all know the tax questions are directed to yourgoodself, its a good job your here !
I think we all know the tax questions are directed to yourgoodself, its a good job your here ! Eric Mc said:
No sale happened, therefore the Output VAT declared on that sale - and paid by you to HMRC - was never actually received by you from your customer. As the customer is returning the stock and you are issuing a sales credit note, then the dale and the related Output VAT will be reversed in your book-keping records and will automatically be deducted from the total sales and Output VAT when the next VAT return is being prepared..
Whch is accountant-speak for 'cancels out' 
The EFFECT is that it will cancel out - but the good accountant/book-keeper would always insist that all the transactions showing both sets of entries (the issuing of the sale and the issuing of theb cancelling credit note) are entered correctly.
After all, that is the essence of "accounting" - i.e. accounting for each and every transaction. Easy/peasy short cuts aren't allowed.
That's why we all end up being pedantic sods.
After all, that is the essence of "accounting" - i.e. accounting for each and every transaction. Easy/peasy short cuts aren't allowed.
That's why we all end up being pedantic sods.
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